July 30, 2025/Cordros Report

NESTLE published their Q2-25 unaudited results after close of business yesterday (29 July), reporting an earnings per share (EPS) of NGN25.73 in Q2-25, a sharp recovery from the loss per share of NGN43.18 in Q2-24. This brings EPS for H1-25 to NGN63.80 from loss per share of NGN223.19 in H1-24. We note that Q2-25 performance was driven by strong pricing gains, solid cost discipline and FX gains (NGN2.97 billion compared to FX loss of NGN72.04 billion in Q2-24).

Revenue advanced by 28.1% y/y in Q2-25 (H1-25: +42.8% y/y), driven by robust growth across the Food (+33.4% y/y | 67.0% of revenue) and Beverages (+18.4% y/y | 33.0% of revenue) segments. We attribute the strong revenue growth to moderate price increases between H2-24 and Q1-25, as heightened consumer price sensitivity shifted preference toward affordability, resulting in softer demand for premium products, especially in Q2-25. This resulted in a marginal 2.9% q/q decline in revenue for Q2-25 from NGN294.88 billion in Q1-25 to NGN223.49 billion.

NESTLE continued to embrace very strong cost discipline in Q2-25, evident in the slower growth pace of cost-to-sales (+24.6% y/y) in Q2-25 compared to +85.9% y/y Q2-24. The blend of a moderate topline performance and strong cost discipline provided the required buffer for cost-to-sales margin to taper by 176bps y/y to 63.2% from 65.0% in Q2-24. Hence, cost-to-sales margin for H1-25 now prints at 61.3% (-743bps y/y), reflective of the company’s strong cost controls. Accordingly, gross margin for Q2-25 expanded by 176bps y/y to 36.8% (Q2-24: 35.0%), bringing H1-25 gross margin to 38.7% (+743bps y/y).

While cost control measures were in place, a sharp increase in administrative expenses (+110.5% y/y) drove the OPEX margin 103bps y/y higher to 17.2% in Q2-25, weighing on operating margin expansion. Consequently, Q2-25 EBITDA margin declined by 36bps y/y to 22.9% (Q2-24: 23.3%). However, reflecting the company’s resilient cost discipline, H1-25 EBITDA margin printed at 25.6%, marking a significant 697bps y/y improvement from 18.6% in H1-24.

Meanwhile, the stable FX environment ensured lesser volatility on FCY loan balances, with NESTLE recording FX gains to the tune of NGN2.97 billion in Q2-25, compared to FX loss of NGN72.04 billion in Q2-24. As a result, finance cost for Q2-25 tapered to NGN19.66 billion from NGN99.34 billion in Q2-24. Hence, net finance cost improved by 80.7% y/y to NGN19.06 billion (Q2-24: NGN98.60 billion).

Ultimately, the company posted a profit before tax of NGN37.24 billion in Q2-25 (Q2-24: pre-tax loss of NGN56.44 billion), while net profit came in at NGN20.39 billion (Q2-24: net loss of NGN34.23 billion), despite a high effective tax rate of 45.2%, total net profit for H1-25 settled at NGN50.57 billion (vs. net loss of NGN176.91 billion in H1-24).

Comment: We like NESTLE’s ability to maintain a strong arm on direct cost components, which greatly supported continued margins recovery in Q2-25. Looking ahead, we believe NESTLE’s strategy to cost optimisation will provide the required buffer for sustained profitability for the rest of 2025FY, supported by improving macro dynamics (disinflation trend and currency stability). Our estimates are under review.